Health, Wealth and Happiness

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How do we know when we're happy? Strange as it may seem, this philosophical question could come back to haunt you one April 15. Psychologists and "happiness researchers" are using the finding that Calcutta slum-dwellers and Masai nomads are as happy as American businessmen to argue not only that wealth doesn't necessarily make you happy, but that this shows that investment in economic growth should be replaced by social programs. The trouble is that one conclusion doesn't necessarily lead to the other.

The argument, laid out in a recent article in The Wall Street Journal, comes from a recent re-evaluation of international surveys of happiness, which generally use a seven-point scale where "1" equates to "not at all satisfied with my life" and "7" equates to "completely satisfied." The analysis found that the consistent correlation between a nation's GDP and its happiness level is seemingly illusory. The Journal summarized, "[T]he money-can-buy-happiness idea...ignores one thing. Wealthy nations tend to be democracies that respect human rights and have a fair legal system, good health care, and effective, honest government. All of these contribute to well-being. When you account for these variables, the effect of income itself on the citizenry's happiness practically vanishes."

Thus, respondents from Forbes's annual list of the 400 richest Americans score 5.8 on the happiness scale. But so do the Inuit of northern <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Greenland and the hut-dwelling Masai of Kenya. Slum dwellers in Calcutta score 4.6, admittedly better than the homeless of that city, who score 2.9.

Yet this assumes that one person's happiness is interchangeable with another's. At one level, this is true, but would a happy millionaire be as happy if he switched places with a Masai tribesman? While some would be, it is probably safe to say that most would not. The question gets more interesting when asked the other way round. We have empirical evidence in the form of immigration statistics that people from the poorer countries want to enjoy the benefits of higher GDPs. Very few of them return home to a supposedly equal state of happiness.

It should be apparent, then, that a "happiness point" in Calcutta might be worth somewhat less than a happiness point in Manhattan. This becomes clearer if one considers happiness in terms of the satisfaction of needs, as in Maslow's famous hierarchy. In that pyramid, physiological needs come first, then safety, then needs of love and belonging, then a desire for esteem and finally what Maslow terms self-actualization, or the point where people become fully functional, acting on their own volition. In places where life is cheap, like the streets of Calcutta, finding safety in the form of a roof over one's head is a significant step up. When a society takes such safety as a given, then other things higher up the hierarchy become the measure of happiness.

And such things are best provided by economic growth. The stronger an economy gets, the more needs of one level will be fulfilled and the more we can take the needs of the next level as the yardstick by which we measure happiness. That is probably why researchers have also found that in America, Japan, and Western Europe, happiness ratings have remained about the same while GDP has soared since the 1950s. We have moved in that time from the social needs of the '50s, through the need for esteem (remember the 1980s?) and are now probably at the level where our happiness is determined by how we meet our self-actualization needs. It is economic growth that has made this possible.

Economic growth has satisfied our hunger, given us a safe environment, a functioning civil society, and the trappings of affluence and has now freed up our time to allow us to devote more time to ourselves. Therefore, when Dutch psychologist Ruut Veenhoven told the Journal that increasing happiness would take "less investment in economic growth and more in policies that promote good governance, liberties, democracy, trust, and public safety" he was being redundant. Economic freedom has historically provided those desirable qualities in spades.

A new survey of economic freedom by the Dallas-based National Center for Policy Analysis concludes that free economies not only grow GDP, but provide the following benefits: life expectancy at birth is 76 years in the free countries, 54 years in the least free ones; infant mortality is 9 times lower in the freest quintile than in the least free; the freer countries do better in health, education, living standards and other measures; the free ones have less corruption in business and government; and there is a correlation between economic freedom and political rights and civil liberties.

Health, wealth, and happiness go together. It is economic freedom, not social justice policies, that best guarantees all three.